Consumer Perception of Internal Brand Extension

Table of Contents

1. Introduction
1.1 Problem Statement
1.2 Purpose of the Work
1.3 Research Request
1.4 Scientific Approach
1.5 Composition

2. Branding
2.1 Purpose of Brands
2.2 Strategic Brand Management Process
2.2.2 Brand Development Strategies
2.2.3 Conceptual Differentiation: Line and Brand Extension

3. Brand Extension
3.1 Purpose
3.2 Internal and External Brand Extension
3.3 Opportunities and Threats

4. The Role of Brands in Brand Extensions
4.1 Consumer Decision-Making
4.2 Brand Knowledge
4.3 Brand Equity
4.3.1 Young and Rubicam’s Brand Asset Evaluator
4.3.2 Customer Equity
4.4 Brand Personality

5. Consumer Acceptance of Brand Extension
5.1 Consumer Perception of Brand Extension
5.1.1 Category-Based Processing
5.1.2 Dominance and Relatedness
5.2 Influencing Successful Brand Extension

6. Perceived Fit
6.1 Definition
6.2 Relevance
6.3 Dimensions
6.4 Influential Factors
6.5 Measuring Fit

7. Conclusion
7.1 Critics
7.2 Findings
7.3 Implementation
7.4 Outlook

8. References
8.1 Books
8.2 Journals

Vorwort

Eine Bachelorarbeit zu verfassen habe ich mir anders vorgestellt, so viel gleich zu Beginn. Ob man das nun positiv oder negativ auffassen soll, ist mir selbst nicht ganz bewusst. Der Lerneffekt jedenfalls, und das kann ich mit Gewissheit sagen, war selten so groß!

Generell bin ich ein neugieriger Mensch, der sich Herausforderungen gerne stellt. Aus diesem Grund habe ich mich auf die BA1 richtig gefreut. Mein Thema war mir sehr sympathisch, der Zeitrahmen erschien mir angemessen und auch die Motivation war gegeben. Dennoch musste ich sehr rasch feststellen, dass alles nicht so einfach ist wie gedacht: Wo fängt man an? Wie gliedert man am besten? Dazu muss man erst die ganze Information im eigenen Kopf ordnen! Wo finde ich genügend Literatur? Wie verwerte ich diese? Ist das ein Plagiat? Selten war ich bei etwas so verunsichert, wie beim Verfassen dieser Arbeit. Sicherheit gab dann seltsamerweise wieder die Unsicherheit der anderen. Es muss also wohl so sein dachte ich mir!

Was ich auf jeden Fall lernen musste ist, dass sich das Schreiben nicht erzwingen lässt. Wenn nichts kommt, dann kommt eben nichts, das muss man akzeptieren. Wenn dann allerdings wieder ein kognitiver Schub kam, gab es nichts anderes – schreiben bis die Tasten glühen hieß die Devise.

Auch meine Wahl, die BA1 in englischer Sprache zu formulieren, legte mir ab und zu ein paar Steine in den Weg. Dennoch bin ich im Nachhinein froh, diese Entscheidung getroffen zu haben! Ja, im Nachhinein, ich weiß, da ist immer alles einfach.

Auf diesem Wege möchte ich mich noch bei meinem Gutachter Herrn Dr.Angerer bedanken, der mir durch sein Feedback etwas Ordnung in den Jungle der BA1 bringen konnte. Mein Dank gilt außerdem Herrn Mag. Winkler, der es in der LV Wissenschaftliches Arbeiten geschafft hat, Unklarheiten bezüglich der Herangehensweise an wissenschaftliche Arbeiten zu klären und durch Humor viel Unsicherheit zu nehmen und zusätzlich zu motivieren.

Abstract In order for brands to satisfy the changing needs of consumers and to gain competitive advantage the number of brand extensions carried through is increasing constantly. This literature based work aims to identify influential factors for consumer acceptance of brand extensions and will have a closer look at the role of brand knowledge in this process. The focus will be on the evaluation of importance of the perceived fit and on determining how this factor can be used by marketers.

The first part of this work gives an insight into brands and brand management, as branding is the base for brand extensions. Then it concentrates on brand extension from a marketing point of view in order to create a common understanding for this strategy. Furthermore it gives details about the consumer-decision making process in order to allow the reader to understand how brands are perceived by consumers. The second part then talks about the consumer evaluation of brand extensions, by giving details about influential factors on this process and how this can be monitored by marketers. It then goes into detail about the perceived fit as influential factor. Finally the findings are discussed with regard to the research requests and the following conclusions are drawn:

- Brand knowledge directly influences consumer perception of brands and therefore brand equity.
- Brand equity is relevant for successful brand extensions. Therefore brand knowledge has impact on consumer evaluation of brand extensions.
- The perceived fit is a highly relevant factor for consumer evaluation of brand extensions as it causes the transfer of positive associations from the parent brand to the extension’s product.

Figures

Figure 1: The Strategic Brand Management Process p. 12

Figure 2: Brand Development Strategies p. 13

Figure 3: Hierarchy of Effects p. 16

Figure 4: Relational Model for Evaluating Proposed Brand Extension p. 21

1. Introduction

1.1 Problem Statement

Nowadays consumers are facing thousands of products each and every day and while they are confronted with more and more choices, they seem to have less and less time to make decisions (Esch/Möll 2005, p. 85). Due to the permanent exposure to stimuli, product and brand images are blurring and it is getting harder for consumers to differentiate. In this jungle of stimulus satiation companies are fighting harder than ever to stand up to their competitors and gain awareness and acceptance (Berend 2002, p. 1). So how can firms differentiate themselves from their competitors? The assumption that it needs a consumer oriented, beneficial product to be successful and to outbid one’s competitor has been proven wrong. As a matter of fact the most successful product will be the one that is being perceived as the most advantageous and beneficial. What really matters is the perception process in the consumers’ minds (Brandtner 2001, pp. 260-265)! Therefore it has to be of high importance for a firm to work on how it is perceived and to transfer these (positive) attributes to all its products and services. In order to reach this goal it needs strong brands to evoke positive associations towards the brand’s products or services and to enable the consumers to differentiate from the products or services of the competition.

In order to gain or maintain competitive advantage brands have to be adapted to their environment. Needs and wants of the brand’s consumers are constantly developing and so should be the product portfolio. A common strategy in developing a brand is brand extension. Although this strategy implies a lot of opportunities, brand extensions can fail too. Whether a brand extension is successful depends on the perception of the consumers: when the consumers perceive the extension’s product as beneficial and transfer positive associations from the parent brand to the product, the extension can be regarded successful. Still the consumer decision-making process is complex and involves numerous influential factors, such as associations, attributes and feelings, which arise due to direct experience or external stimuli.

The question arises: what exactly influences whether a brand extension is perceived as favourable and how can a marketer intervene in this process, respectively which factors have to be considered in order to create a good base for a successful brand extension?

1.2 Purpose of the Work

The purpose of this Bachelorarbeit 1 is to look at the relevance of brands and brand management strategies, as well as at the consumer decision-making process when it comes to purchase and brand decisions. Furthermore it will have a look at brand development strategies, specifically at brand extensions. Hence, the aim is to elaborate factors that influence consumer perception and acceptance of brand extensions and to evaluate how these factors can be influenced by marketers. A special focus will be laid on the necessity of brand knowledge in this process and which role the perceived fit plays.

1.3 Research Request

As stated in the chapter above, this work aims to lay a focus on the relevance of brand knowledge and especially the perceived fit on consumer evaluation of brand extensions. Therefore two research questions can be deduced.

Research Request: which factors influence consumer perception of internal brand extension?

Sub Research Request: how does the Perceived Fit influence the consumer acceptance of brand extension?

1.4 Scientific Approach

This work is based on scientific literature only. It contains monographs, compilations and articles from the Journal of Marketing, the Journal of Consumer Marketing, the Journal of Marketing Research, the Journal of Brand Management, the Journal of Consumer Psychology and the Journal of Marketing Management. All literature used comes either out of the brand management, the consumer research or the psychological field.

1.5 Composition

Chapter 2 introduces the reader with the topic branding. It will explain why brands exist, which role they play and why and how they have to be managed. This includes an insight into the strategic brand management process and brand development strategies. Furthermore it explains the conceptual differentiation between line and brand extensions.

Chapter 3 explains brand extensions from a marketing point of view. It gives insights into the purpose of this strategy, differentiates between internal and external brand extensions and lists opportunities and threats.

Chapter 4 allows the reader to understand how consumers perceive brands and how they make purchase and brand related decisions. It also gives further details about brand knowledge and brand equity, which are important influential factors for consumer perception of brands and also brand extension.

Chapter 5 talks about consumer acceptance of internal brand extension. This includes an insight into how consumers perceive brand extensions and which factors influence this process.

Chapter 6 goes into detail about the perceived fit, by explaining its relevance for the perception process of consumers, by explaining its dimensions. It will also be explained how this can be used by marketers and how fit can be measured.

In chapter 7 some critics about the perceived fit are mentioned. Furthermore the overall findings are summed up. This results in the implementations of the findings of this work and the outlook on further research.

2. Branding

2.1 Purpose of Brands

A brand is a “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of the competition“ (Keller et al. 2008, p. 7). This definition implements the thought that whenever a new name, symbol or design for a good or service is being created, automatically a new brand has been created. However, mostly brands are seen as more than that – as Kotler and Armstrong state “a brand represents everything that a product or service means to a customer“ (Kotler/Armstrong 2010, p. 260) and is a key asset in the company’s relationship with its customers. It identifies where a product comes from and therefore stands for quality and represents former experiences between the brand’s products and the consumers (Keller et al. 2008, p. 7).

Although brands are so important they have to face numerous challenges that arise from changes of the market, the society and other influential factors. Some of the challenges are: the fact that customers have become experienced with marketing processes and are more demanding; maturing markets; more sophisticated and increasing competition; the difficulty for the customers to differentiate; also the facts that brand loyalty is decreasing and the trade power is increasing and finally the fragmenting media coverage. These and many other challenges explain the necessity of strategic brand management. Brand management means to “plan and control the achievement of revenue from one or a limited number of brands” (Bureau 1981, p. 3). Generally spoken it stands for building and growing a strong brand, which is crucial for all firms.

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